Energy News Today

Energy Transfer’s Gulf Run pipeline to export fracked gas from Louisiana set to begin construction


In June, the Federal Energy Regulatory Commission (FERC) narrowly
approved the construction of a new 42” diameter gas pipeline that will connect
shale wells in Louisiana, Pennsylvania, Texas, and Ohio to a liquefied
natural gas (LNG) terminal on the Gulf Coast, carrying over a billion
cubic feet of fracked gas to be transported overseas every day.

The FERC decision was split, with two of the five commissioners
dissenting, writing that the Commission had failed to adequately examine
the climate-changing pollution linked to the fossil fuel pipeline. 

That dissent in Gulf Run takes on new relevance as the term of FERC
Commissioner Neil Chatterjee, appointed by Donald Trump in 2017, ended
on Wednesday. President Joe Biden is expected to soon announce a nominee
as Chatterjee’s replacement — a decision rumored to be between Willie Phillips, who, according to Politico Morning Energy,
previously worked for Jeff Sessions and interned in George W. Bush’s
Office of General Counsel, and Maria Duaime Robinson, a former official
with Advanced Energy Economy, which advocates for solar, wind, hydroelectric and nuclear energy. 

The Gulf Run pipeline, one small piece of the shale industry’s
strategy to revive itself despite the growing climate crisis, offers a
view of the crossroads faced by the Biden administration. 

The project highlights federal regulators’ continued
business-as-usual approach to fossil fuel infrastructure projects with
decades-long expected lifespans and regulators’ failures to curb greenhouse gas emissions.

On the other hand, shifts within FERC could provide federal
regulators with the opportunity to begin encouraging an energy
transition, with energy experts at the International Energy Agency
calling for an end to all new fossil fuel investments, citing the
urgency of the climate crisis — a plan made all the more feasible by the
rise of low-cost renewable energy options.

Running to the Gulf

Once built, the 134-mile Gulf Run pipeline will carry 1.1 billion
cubic feet (bcf) of gas each day to the Golden Pass LNG terminal, a
project by ExxonMobil and Qatar Petroleum aiming
to export up to 2.5 bcf per day by 2026. That’s enough gas each day to
supply roughly 12.5 million U.S. homes. But the Gulf Run pipeline is
able to transport even more than that, with a total capacity of up to
1.7 bcf per day. The pipeline’s backers plan to have it up and running
by 2022 (though Golden Pass won’t begin exporting LNG until 2025).

Energy Transfer — the builder of the Dakota Access, Mariner East, and Bayou Bridge pipelines — announced
in February that it was acquiring Enable Midstream, the company behind
Gulf Run. Gulf Run’s relatively modest price tag — estimated at $540 million by its builders or over $1.1 billion by FERC — belies the volume of gas it can carry, which is greater than the canceled Atlantic Coast pipeline, which clocked in at 1.5 bcf per day and wound up embroiled in legal challenges that reached the Supreme Court.

Gulf Run’s relatively low construction cost, compared to other
pipelines capable of carrying a similar amount of gas, is in part
because the project, according to
Enable’s CEO Ron Sailor, “makes significant use of existing assets”  —
only part of the pipeline will be newly built, with the rest consisting
of repurposed existing pipes and compressor stations that will be
modified to allow gas to flow in two directions. The company also noted
that it acquired pipe for the new construction at “favorable pricing
relative to market.”

The Gulf Run pipeline is particularly important to drillers in
Louisiana’s Haynesville shale, where the build-out of petrochemical
plants and LNG export terminals on the Gulf is already spurring more
drilling. “While most U.S. operators opt to maximize free cash flow over
growth, producers in the Haynesville appear more bullish this year,”
trade publication S&P Global reported in April.

“The Haynesville is set to become the largest source of gas output
growth in the U.S., forecast to add about 10 bcfd from 2020 to 2035,
growing by 86% during that time,” the Oil and Gas Journal reported this
month. “A key factor in Haynesville’s ability to sustain an advantage
against the Appalachian region will be to maintain the relative ease
with which operators can transport gas from wellheads to Gulf coast
markets, compared to the bottlenecks and midstream project cancellations
faced by producers in the Northeast.”

In other words, Gulf Run (along with two other Tellurian pipelines
that the Oil and Gas Journal noted are currently deferred) is key to
connecting the Haynesville shale’s fracked gas to buyers abroad. 

In 2011, the Haynesville shale was the top producer of gas in the U.S. — before it was displaced
by the rush to drill in the Marcellus shale in Appalachia. But since
2017, production in the Haynesville has climbed back up, rising to over
12 million cubic feet per day and hitting record highs this year,
according to data from the Energy Information Administration (EIA). 

Fracking in the Haynesville Shale near Shreveport, Louisiana, 2013. Photo Credit: Daniel Foster, via Flickr.

Already, about 50 drilling rigs are active in the Haynesville, S&P Global reported
earlier this month. That’s about double the number of rigs drilling for
gas in the Marcellus shale; meanwhile, the Permian, where drillers
largely hunt for oil, is still home to about five times as many drilling
rigs as the Haynesville. In June, about 15 percent of the gas produced
in the U.S. came from the Haynesville, EIA data shows.

“With FERC approval and the demand for LNG increasing globally, the
project is well-positioned to add new customer commitments,” Sailor said
in a statement announcing the green light for Gulf Run.

Shake-up at FERC

FERC Chairman Richard Glick and Commissioner Allison Clements both
objected in their dissent to the lack of a full environmental review for
Gulf Run — particularly when it comes to climate change. The same two
commissioners also dissented in June on similar grounds from a permit for a smaller pipeline project in North Dakota.

“The Commission should have prepared a supplemental environmental
impact statement (EIS) to examine the effect that the GHG [greenhouse
gas] emissions caused by the Projects will have on climate change,” the
two commissioners wrote,
adding that they believed the environmental assessment that was
provided “is insufficient to satisfy our responsibilities” under federal
law.

Even under the pro-fossil fuel Trump administration, FERC grew increasingly divided over how to handle natural gas pipelines, though it remains extremely rare for the commission to reject pipeline permit applications. In 2018, FERC’s then-chairman Kevin McIntyre noted that the split within the commission “has presented challenges” for approvals in court and on appeal. 

Gillian Giannetti, an attorney with the Natural Resources Defense
Fund’s Sustainable FERC project, declined to weigh in on the Gulf Run
pipeline’s potential vulnerability to future legal challenge in light of
the dissenter’s views, pointing instead to the ways that Glick and
Clements’ dissent reflects broader shifts underway — no matter who Biden
nominates — in how FERC approaches climate change.

In March, FERC announced
that it had “for the first time assessed the significance of a proposed
natural gas pipeline project’s greenhouse gas emissions and their
contribution to climate change” as it approved a permit request from the
Northern Natural Gas Company. 

The details of how exactly that review should be done are still being
developed, Giannetti noted. “But Northern Natural got rid of FERC’s
longstanding claim that it was universally incapable of assessing the
significance of a project’s climate impacts, and it is clear that
Chairman Glick believes that FERC must make all reasonable efforts to
make a significance assessment in every case.”

President Biden has not yet announced a nominee for Commissioner
Chatterjee’s replacement, who must then be confirmed by the Senate, but
environmental groups are watching the decision closely.

“History may record that President Biden’s 2021 appointment of a
strong climate champion to be a FERC commissioner was one of the most
consequential actions he took to slow, stop and reverse global heating
over the course of the 21st century,” Ted Glick of Beyond Extreme Energy
said in a statement accompanying a letter
signed by over 320 environmental and community advocates calling for
FERC to stop approving new fossil fuel projects and in particular
pipelines for shale gas and fossil fuel exports. “This is the importance
of this nomination.”

But that’s not the only major change on the horizon at FERC. Last
week, the commission established a new Office of Public Participation,
which aims to allow smaller organizations and individuals access to
FERC’s proceedings, which commissioners have acknowledged
are complex. In 2022, the new office will start working on developing a
program to help public interest groups obtain funding for the legal
costs associated with playing a role in a FERC proceeding. 

“As commissioners, we take votes on many important and pressing issues,” Commissioner Clements told
trade publication Utility Dive. “That said, I’m sure this is one of the
most important things that will happen during my tenure at the
commission.”

The judicial branch of government has also just upended how FERC has traditionally approached fossil fuel pipelines. 

Shortly after FERC’s approval of Gulf Run, the U.S. Court of Appeals for the District of Columbia Circuit tossed out permits for another pipeline, the Spire STL pipeline project, after finding that FERC had failed to properly examine whether there was in fact enough demand for natural gas to justify the pipeline’s construction. 

For years, FERC has deferred to pipeline builders on that question — despite evidence that the pipeline industry often overbuilds.
“Several major pipeline projects approved by FERC have been later
abandoned,” the Institute for Energy Economics and Financial Analysis noted.

FERC historically treated contracts — even in cases of self-dealing—
as evidence of need, “regardless of the number of shippers, volume under
subscription or the duration of the agreement(s),” Giannetti said.
“Spire ended that. Spire draws a line in the sand.”

Roughly two thirds of Gulf Run’s capacity will be used to supply the
Golden Pass LNG export terminal, according to the pipeline’s October
2020 environmental assessment, which is silent about what the company plans to do with the remaining third.

This push forward on Gulf Run’s construction and other fossil fuel projects comes as the International Energy Agency warned
in May that the path to the “critical and formidable goal” of
preventing catastrophic climate change of over 1.5 degrees Celsius
requires, “from today, no investment in new fossil fuel supply
projects.” 

LNG prospects cloudy

Gulf Run is just one piece of an overall strategy to try to revive the flailing
shale gas drilling industry — particularly Louisiana’s Haynesville
shale, near the Gulf Coast — by connecting the methane gas from fracked
wells in the U.S. to buyers around the world, despite concerns over the gas industry’s role in heating the climate. 

But an LNG-reliant strategy carries significant risks. Earlier this
month, a report by the nonprofit Global Energy Monitor found that LNG
investors are growing skittish of the fossil fuel’s poor economics along
with increasing scrutiny on the industry’s large carbon footprint. LNG
production and transportation releases significant amounts of methane
into the atmosphere which has a more powerful warming effect in the
near-term than carbon dioxide.

“Once regarded as a potential climate solution, LNG is increasingly regarded as a climate problem, particularly for European buyers,” Global Energy Monitor wrote. “According to the [International Energy Agency], inter-regional LNG trade would need to decline rapidly after 2025 under a 2050 net zero scenario.”

Analysts have warned for years that the Gulf Coast LNG build-out also faces physical risks from a changing climate, particularly as hurricanes become more powerful and difficult to predict.

At the same time, the report notes, the industry is facing
significant headwinds amid competition from renewable energy both in the
U.S. and abroad. The LNG construction market is also notoriously tricky
because it requires huge investments upfront while the price of natural
gas is extremely fickle. The Golden Pass project itself was initially
launched in 2003 as a terminal that would import LNG
into the U.S. — in fact, it received its first imported LNG cargo in
2010 — before the shale gas rush abruptly upended the project and sent
designers back to the drawing board.

Liquefying natural gas to send it abroad is also fundamentally costly
— not just in terms of the required investments, but also in terms of
the climate-altering emissions produced by LNG terminals. 

The $10 billion Golden Pass LNG terminal, the “crown jewel of Exxon’s U.S. LNG export business,” a Bloomberg investigation reported last year, will pump out as much greenhouse gas per year as a coal-fired power plant, “just based on the sheer amount of energy it takes to compress natural gas into a liquid for shipment. Transporting and burning the exported fuel would emit even more.”

Climate watchdogs are calling on President Biden to nominate a new
FERC commissioner who will instead support an energy transition.“FERC
has failed to drive the transition to renewables for too long,” Donna
Chavis, senior climate campaigner at Friends of the Earth U.S. said in a
statement.
“Biden has a golden opportunity to install a qualified climate champion
to build the clean and resilient electricity grid the US so desperately
needs.”

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Read More: Energy Transfer’s Gulf Run pipeline to export fracked gas from Louisiana set to begin construction

2021-07-03 11:04:00

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